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ERP Historical Perspective

Enterprise Resource Planning (ERP) systems are arguably one of the most

important advancements in a company’s information system architecture during the latter half of the 20^th century (Davenport, 1998; Jacobs, 2007; Leon, 2008). The benefits companies gain from ERP systems are only partly related to the technology itself; equally or more important are the associated organizational changes. Some examples include new business processes, work procedures, organizational structure alignment, the centralization of operational and administrative tasks, and the standardization of work processes leading to organizational improvements, of which the technology supports (Hedman & Borell, 2003).

The origins of ERP began in the latter half of the 20^th century when companies started utilizing computerized software systems to aid in bookkeeping, inventory

management, and to automate simple tasks. As early as the 1940s, calculating machines were introduced to businesses to help improve factory output and switch from paper to electronic record-keeping (Jacobs, 2007). IBM began development of the first

mainframe applications during the 1960s to aid in inventory management and machine control, which followed into the development of Material Requirements Planning (MRP) systems in the 1970s to automate production and master scheduling tasks for producers (Cassidy, 1998; Jacobs, 2007; Kalakota & Robinson, 2001). At the time, MRP was a source of competitive advantage for companies: they were not widely used and provided insight and automation to traditionally manual tasks. During this time, it was common for companies to have a multitude of different smaller niche software packages in place

to best meet the needs of a specific department. A purchasing department may have had a particular software system in place to aid in the procurement of goods, while the accounting department may have had a separate software system to manage the flow of capital. It was common for these “legacy systems” to be based on machine code and programming languages such as COBOL, ALGOL, BASIC, and FORTRAN. From the perspective of pulling data to gauge the overall health and direction of a company, however, it was very difficult. The data was often in differing formats, challenging to obtain, with typically little to no consistency or communication between systems. The separation of data in various systems made it difficult for organizations to consolidate information, to obtain a universal picture of what was happening within the organization, and to plan for the future (Davenport, 2000).

The 1980s saw an emphasis on more advanced computers designed for small and intermediate-sized companies with the advent of the IBM Application System/400 (AS/400) and other server technologies (Cassidy, 1998). During this time, the

introduction of Manufacturing Resources Planning II systems, or MRPII, occurred as an extension of MRP with an emphasis on optimizing production processes as well as the inclusion of other business functions such as customer order processing, manufacturing, and distribution (Kalakota & Robinson, 2001). While MRPII offered a wider range of enhancements to MRP, it was highly focused on the manufacturing industry and suffered from a variety of limitations in the areas of inventory, order, and production planning (Jacobs, 2007). These challenges eventually necessitated the creation of a completely company-integrated solution called Enterprise Resource Planning or “ERP”.

ERP expanded on the foundations of MRP and MRPII and addressed the cross-functional, information-sharing needs by connecting departments through a single, centralized database (Cassidy, 1998). It was at this time where many production and manufacturing companies began replacing their proprietary and niche systems with these standardized packaged software solutions to aid in the effort (Kaniyar et al., 2015).

“These commercial software packages promise the seamless integration of all the information flowing through a company– financial and accounting information, human resource information, supply chain information, customer information” (Davenport, 1998, p. 131). ERP now housed enterprise-wide functionality and included

enhancements such as a graphical user interface, the use of object technology, workflow management, interconnected relational databases, and a client/server architecture

(Cassidy, 1998). Whereas MRPII had focused on production efficiency and scheduling, ERP incorporated a broader business scope for use in a whole system adaptation.

The mid- to late-90s saw ERP vendors such as Oracle, JD Edwards, and SAP gain recognition and market presence as companies began migrating their aging platforms to these systems (Davenport, 1998). Throughout the 2000s, ERP slowly began integrating internet connectivity into the platform with further modular functionality expansions into areas such as business intelligence (BI), customer relationship management (CRM), supplier relationship management (SRM) and online commerce (Jacobs, 2007). Today, key players in the ERP system market such as SAP, Microsoft, Epicor, Oracle, and Infor continue to build their solutions while concentrating on the transition from on-site system architecture to cloud computing. Companies of all sizes are more likely today to utilize and implement ERP systems, as they were in the past generally considered only

applicable to larger corporations (Esteves, 2009). Kumar and Hillegersber (2000) stated that ERP systems are becoming so common in today’s business environment that they are

“the price of entry for running a business” (p. 24). Moreover, ERP systems account for the largest and most demanding information technology system that companies

implement and represent the largest single IT investment affecting the greatest number of people and business processes (Chang, Cheung, Cheng, & Yeung, 2008). Companies today are retiring legacy systems in favor of ERP systems at an exponential rate, with a variety of options for implementing an ERP system to become “more competitive, efficient and customer-friendly” (Esteves, 2009, p. 25). As ERP continues to become more interconnected within the people and technology structures in an organization, this trend is likely to only increase.

Why ERP Implementations Fail

Over the years, ERP has generated its share of mixed opinions regarding perceived benefits and risks to a company (Ang & Slaughter, 2000; Barker & Frolick, 2003; Chartered Professional Accountants of Canada, 2017; Davenport, 2000), and the subject of “why ERP implementations fail” has been well-researched. A failed ERP implementation refers generally to two ranges of failure: partial or complete failures. An implementation could be considered a partial failure if a company does not significantly meet their project objectives or the project resulted in some form of major disruption in daily activities. These disruptions can cause companies to experience decreases in performance instead of realizing the intended improvements the new system was to provide. Conversely, a complete failure occurs if the company suffered significant long-term financial damage due to the project or they abandoned the implementation

altogether, possibly reverting to their legacy system. Bearing in mind the immense amount of time, money, and resources allocated towards an ERP implementation, the damage companies endure resulting from a failed implementation can be staggering.

Chen, Law, and Yang (2009) indicated that upward of 40% of ERP projects fail to meet business requirements, while another study by Robbins-Gioia (2002) found as many as 51% of companies felt their ERP implementations were unsuccessful.

Although there is seldom a single aspect responsible for a failed implementation, there are categories of risk associated with ERP implementations that can contribute towards its failure. A study conducted by Huang, Chang, Li, and Lin (2004) broke down the ERP implementation process and modeled these risk factors into six categories:

organizational fit, skill mix, project management, system design, user involvement, and technology planning, with user involvement and project management being the two most heavily-weighted categories in terms of the effect on risk. Organizational fit refers to resource availability and change management capabilities for the company undergoing the implementation. Elements such as failure to document and redesign business processes to better align with system functionality and cross-departmental design are factors that fall within this category. An example of a failed ERP implementation due to organization fit challenges involved the Washington State Community College (WSCC) system in 2012. The project involved upgrading the community colleges’ legacy systems to PeopleSoft’s ERP platform and was delayed multiple times due to internal

departmental issues. Each one of their 34 campuses had widely varying business processes that were not redesigned or standardized to fit within the scope in which PeopleSoft operated, an issue that was not recognized until well past the established

go-live in August 2013 (Washington State Board for Community and Technical Colleges, 2017). Two hundred and forty business processes needed to change with the new

software. Furthermore, their implementation partner filed for bankruptcy in 2017 only to have their assets acquired by another company, which later canceled the contract with WSCC and sued them for $13 million. They cited the failed rollout was due to "internal dysfunction" on the colleges' part (Washington State Board for Community and

Technical Colleges, 2017).

The area of skill mix refers to the skillset shared by internal and external company resources versus the skillset required for successful implementation. Failures can

originate from inadequate staffing and lack of subject matter experts (SMEs), and too few employees with both company and technology knowledge to effectively aid in

determining how the software will meet business requirements. A failed implementation involving Woolworths of Australia is an example of this theme in the context of its $200 million, six-year implementation. Woolworths’ project involved migrating to SAP’s ERP platform, and individual stores lost insight into key reporting capabilities after they went live (Boyd, 2016). A key challenge was that they did not fully understand their internal processes: daily business procedures were not properly documented, and store managers and subject matter experts were not involved with the implementation. Woolworths also saw an increase in the number of senior staff leaving the company due to the lengthy implementation, taking valuable institutional knowledge with them and further

exacerbating the problem. Many of their replacements had little experience with ERP systems and therefore a steep learning curve was experienced during a critical phase of the project.

In terms of project management and control, risk areas include lack of agreement and consensus on project goals, commitment from senior management, project

management methodology, and having the right team members on the project. The fourth risk category in ERP implementations is software system design. Factors can include a lack of effective software management methodology, lack of integration between enterprise-wise systems, and unclear or misunderstood system requirements. A case of ERP failure involving contributors from both categories of project management and software system design occurred with Hewlett Packard (HP) in 2004, resulting in

$160 million in order backlogs and lost revenue (Chaturvedi, 2005). HP’s stated objective was a “reduction of its 35 ERP systems implemented worldwide to four ERP codebases along with a reduction in applications from 3,500 to 1,500” (Chaturvedi, 2005, p. 5). Upon go-live of HP’s singular SAP system, they experienced problems involving legacy system data migration issues and programming errors, coupled with a lack of manual processes in place to meet order demand in the interim. Project management problems, such as coordination between project teams and functional areas, arose due to the high level of interdependence between project teams, while poor planning and inadequate testing resulted because they were not well defined in the project timeline.

HP had not developed an effective contingency plan and was not prepared to address the build-up of problems that coincided with increased demand for its products in that timeframe. Meanwhile, the lack of effective product training, development, and data management practices were identified as major contributors to the technical issues experienced (Chaturvedi, 2005).

The fifth risk area is user involvement and training. Risk factors surrounding user involvement may include terms of insufficient end-user training, ineffective

communication with end-users, lack of user buy-in and support, and departmental conflicts. One often-cited case study in ERP implementation failure resulting from risk factors in this area occurred with The Hershey Foods Company in 1996. Hershey’s embarked to upgrade its legacy ERP systems into an integrated environment, using SAP’s R/3 ERP platform, in conjunction with two other vendors for CRM and logistics functionality. Despite having been recommended a project timeline of 48 months,

Hershey’s demanded a 30-month timeline to complete the implementation before the year 2000 (Madu & Kuei, 2004). Because of these scheduling constraints, go-live was

planned for July of 1999, which also coincided with their busiest Halloween and Christmas production periods of the year. To meet the aggressive scheduling demands, the Hershey’s implementation team neglected critical end-user training and systems testing. When the company went live in July of 1999, unforeseen technical problems prevented orders from being communicated throughout the system, and Hershey’s was unable to meet the demands of its major retailers even though they had ample supply of inventory. Hershey’s employees had not received adequate communication throughout the project and were quickly faced with the compounded task of learning three new ERP solutions while trying to troubleshoot the ordering functionality to meet customer

demands. These factors contributed to an unpleasant work experience and the rejection of the ERP system by employees (Madu & Kuei, 2004). Overall, the $115 million project resulted in a 12.4% loss in third-quarter sales and earnings were reduced by 18.6% (Madu & Kuei, 2004). Hershey’s error was trading user involvement, training,

and systems testing for expediency. As a result, data, process, and systems issues remained undetected until go-live.

Lastly, technology planning is the sixth category of risk associated with ERP implementations, and this includes factors such as technology stability, excessive customization, newness, infrastructure capability, and integration capabilities. A case study involving the Egyptian state-owned company AML attributed their ERP system failure largely to factors within this category. Due to Egypt’s largely state-controlled economy, a mandatory and uniformed accounting system was introduced in 1966, an architecture that defined how financial and cost accounting practices were conducted in the country. AML, a company based out of The Netherlands with a branch in Egypt, was one of the companies that were subject to this accounting system requirement. During their transition to the company’s global SAP ERP platform, they found that the new system was too inflexible to satisfy the accounting standards of the Egyptian branch.

AML’s consultants highly customized the software in an attempt to satisfy those requirements, but the modifications ended up creating greater complexity while continuing to challenge Egypt’s uniform accounting system (Kholeif, Abdel‐Kader, &

Sherer, 2007). Multiple iterations of the customized product saw stability and capacity issues, and the project was eventually abandoned after the cost of implementation continued to accrue, with little progress having been made.

The implementation of a new ERP system is often new territory for most

organizations that may lack experience with large and complex IT projects. The research suggests that most ERP implementations do not fail due to a poor selection process or the functionality of the ERP software; instead, most of the post-project assessment points to

the implementation process, leadership shortcomings, or the project management process.

However, considering the importance of human-related experiences in ERP implementations, relatively little research has been published regarding them in

conjunction with ERP failure. Change management capacity and employee training were discussed throughout the review, but neither focused heavily on ERP use or its impact on the end-user.

Major Sources of Turnover and Dissatisfaction

The third element of reviewed literature transitions from technical to

psychological, focusing on the drivers of employee motivation, engagement, retention, and turnover. While each of these involves considerable complexity, this section was intended to explore commonalities between each topic to ascertain whether there are underlying factors that enable levels of high satisfaction and commitment and, conversely, those that contribute to dissatisfaction or possible voluntary turnover.

Furthermore, the objective was to explore research into employee satisfaction itself, the experiences that drive employees to stay or leave an organization under normal

circumstances, and to determine whether such experiences are present or affected during an ERP system implementation.

Thompson and Phua (2012) defined job satisfaction as “how content an individual is with his or her job” (p. 275), or aspects of the job in which the employee is engaged.

These are multi-dimensional, psychological responses (Hulin & Judge, 2003), which are affected by such variables as the nature of their work, the tasks they need to perform, and the nature of their supervision. The measurement of job satisfaction can either be

affective, which focuses on the feelings employees have about their job, or cognitive,

which focuses on how happy the employee is with the job and their tasks overall (Kumari, Joshi, & Pandey, 2014).

Subsequently, employee motivation is broadly defined as “pertaining to the conditions and processes that account for the arousal, direction, magnitude, and

maintenance of effort in a person's job” (Katzell & Thompson, 1990, p. 144). Research surrounding employee motivation among behavioral scientists who study organizations has escalated over the past thirty years, and no other subject arguably has received more attention in recent journals and textbooks of organizational behavior (Hausknecht, 2017).

Motivation can be categorized as either intrinsic or extrinsic in nature. Intrinsic

motivation refers to working or engaging in an activity by desires to do something for its own sake (Deci & Ryan, 1975). Such tasks are those that people voluntarily perform with the absence of material rewards and are internally rewarding. Extrinsic motivation refers to being motivated by external factors: working to earn pay or a reward, having security, or avoiding punishment. Research by Saleh and Hyde (1969) found that employees who are more intrinsically oriented to their jobs have a higher level of job satisfaction than those that are more extrinsically oriented. These positive emotions come from the desire for people to participate competently in a role in which they have internalized into their identity (Deci & Ryan, 2000). They also stressed the importance of aligning employees with their work; tasks or jobs that are less challenging may not be as intrinsically satisfying to someone who puts importance on intrinsic rewards. This misalignment may leave the employee feeling unfulfilled and may contribute to a negative effect on their motivation.

There are at least ten theories and models of motivation that are relevant to understanding engagement, satisfaction, and turnover. Katzell and Thompson (1990) suggested a categorization of the many theories of employee motivation as either dealing with exogenous causes or endogenous processes. Exogenous theories are those that focus on independent variables that can be influenced by external forces such as company incentives, rewards, and social aspects including leadership and group behaviors. Of the many different theories provided, some examples used to illustrate this include

motive/need theory, in which people have certain motives to seek or avoid certain kinds of stimuli in the workplace. These motives influence behavior and are seen as key determinants of performance. The motivations and values of employees must, therefore, be aligned with their jobs and the companies in which they work.

Incentive/reward theory describes aspects of an employee’s work environment that leads the employee to associate certain forms of behavior, like the quality of work, with rewards, such as praise (Katzell & Thompson, 1990). Disincentives are stimuli that evoke avoidance, such as a company policy that docks pay when an employee is absent.

Katzell and Thompson (1990) described the socio-technical system theory in which employees are driven to perform well when their work system is designed to harmonize the requirements for effective personal, social, and technological functionality. The work should be meaningful, challenging, and diversified, while employees should have the skills, autonomy, and resources to accomplish it well. Hackman, Oldham, and Pearce

Katzell and Thompson (1990) described the socio-technical system theory in which employees are driven to perform well when their work system is designed to harmonize the requirements for effective personal, social, and technological functionality. The work should be meaningful, challenging, and diversified, while employees should have the skills, autonomy, and resources to accomplish it well. Hackman, Oldham, and Pearce